Daniel Petre on the genius of Bill Gates, and Australia’s tech policy ‘madness’

Daniel Petre is one of the elder statesmen of Australia’s ascendant technology industry. So when he uses terms like “criminal”, “appalling”, “disaster” and “madness” to describe the Federal government’s approach to innovation policy, it is worth sitting up and paying attention.

The Big Interview: Daniel Petre

“There won’t be jobs if we don’t work out how to create an innovative economy” Tech founder Daniel Petre has a vision for the technology industry and the future of Australia.

Few Australians can speak with the level of authority Petre has on matters like these. After working at the highest levels of one of the world’s truly iconic software companies during its most dominant period, he became a successful venture capitalist, backing high growth tech start-ups for the Packers, Murdochs and major superannuation funds.

Along the way, he has championed philanthropy, advocated for work/life balance, and acted a sounding board for prime ministers from both sides of politics.

Over the past three decades, Petre has been one of the key figures in Australia’s tech industry, witnessing its rise from obscurity to become a meaningful part of the economy. But now, he is worried that the hard fought gains the sector has achieved could well be squandered.

“My fear is that in particular governments will do things that will just blow it up, and then we’ll go back to the bad old days where there’s no money in the [tech] industry, no-one wants to invest and we’ll have destroyed the future for Australia.”

Petre is these days a co-founder and partner of AirTree Ventures, a tech start-up investment fund that manages over $300 million. But it was at Microsoft during the dot-com era where he really made his name.

Tech policy

In recent months, the perception has grown that policymakers in Australia have turned against tech. Encryption legislation designed to prevent criminals and terrorists from communicating with each other was rushed through parliament, with bipartisan support, on the last sitting day of the year. That deeply upset the tech industry, which fears the laws will set a dangerous precedent, and place an unfair burden on local start-ups.

The government has also been clamping down on research and development tax breaks. Put this together with restrictions on immigration, which make it harder for tech companies to hire talent from offshore, and the picture you get isn’t pretty.

“It’s quite clear that we’re entering a time where there’ll be a lot of job disruption because of technology. So you’d think in that framework you’d say, well we need to do everything we can to be the most innovative country we can in the world,” says Petre.

“Pretty much the government’s done everything it can to make us the antithesis of that.”

Working with Bill Gates

In 1988, aged just 29, and with a few years of experience in the computer industry under his belt, Petre was appointed managing director of Microsoft’s operations in Australia.

Over the next nine years, he rose through the ranks to become one of the company’s most senior global executives.

After moving to its head office, near Seattle, he was promoted to run Microsoft’s communications products, including its email service Outlook.

He reported directly to its billionaire co-founder, Bill Gates, who to this day remains a personal friend. “It was the best working experience of my life bar none,” Petre says. “And primarily because of Bill Gates.”

In those days, the desktop computer was still the dominant technological device in most people’s lives, and Microsoft, which made the software that powered the lion’s share of them, was the world’s most powerful tech company.

Petre had a front row seat to this spectacle, and working closely with Gates in his prime was a priceless learning experience.

“Working with someone like Bill Gates, you learn so much about how to think about business and products and problem-solving,” Petre recounts. “So it was an extraordinary experience and stayed with me for the rest of my life.”

Working culture

Petre has worked with some high calibre people in his career. He says the best leaders tend to have high intellect, immense curiosity, and elevated levels of self-awareness. None more so than Gates.

“He doesn’t suffer fools gladly,” Petre says. “By that I mean you can’t have random ideas without data. You can have ideas, they’ve got to be backed up.”

“The second part of that, which was very instructive, was if something went wrong people weren’t yelled at. It was, okay, well, what did we get wrong in our execution or what did we get wrong in our planning?”

It was “not a blame culture, but more a learning culture,” he recounts. “That sort of process is something I’ve tried to take with me in other organisations that I’ve been involved with.”

Microsoft in its golden era grew so dominant that regulators in the US attempted to break it up. There are some striking parallels between that period and today, with governments around the world (including in Australia) now grappling with the dominance of two of today’s internet giants, Google and Facebook, in the digital advertising market.

Petre has been outspoken in warning regulators against overreach in their attempts to regulate the so-called digital duopoly.

“I think regulators are struggling to understand how to deal with companies that are being dominant in a space,” he says. “I’m not sure the Microsoft case was that fair…today I think there’s a similar set of issues that need to be unpacked with a bit more nuance if you look at Google or Facebook.”

These days, Bill Gates is considered one of the elder statesmen of the global economy. Yet back when Petre was reporting to him, and particularly during its court case with the US government, the billionaire was often depicted as an indignant and ruthless wunderkind.

Gates vs Zuckerberg

Does Petre see any similarities between Gates and another Harvard drop-out turned software billionaire wunderkind, namely Facebook’s Mark Zuckerberg? In short, not really. “Well they’re obviously both incredibly bright people,” he says. “I think Bill built a far better company with far less major disasters [for society]”

“Also I think Bill, even though he didn’t like it, took on board some of the criticisms. Whereas Mark Zuckerberg seems to have taking that early [approach] of, you know, move fast, break things. Which is fine if you’re 12 people. If you’re the sort of company you are now with two billion consumers, I don’t think that approach really works that well.”

Trajectory of Australian tech

Tragedy brought Petre back to Australia — he returned from the US when his sister was killed in a car accident. But it didn’t forestall his career. After some time running Microsoft’s Asia Pacific operations from Sydney, he decided to change tack and become a venture capitalist.

He has subsequently founded and run three technology investment vehicles: ecorp, which was backed by the Packer family; Netus, which was backed by News Corp (and eventually acquired by Fairfax Media) and now AirTree, which counts some of the nation’s biggest super funds among its investors.

“The difference I think between the ecorp, Netus and AirTree years is just the cadence of new opportunities,” he says.

“In the five years of Netus…we probably saw 500 start-ups. We were seeing most of the good ideas. In AirTree we’re seeing about 1000 a year. Part of that is because people can develop a start-up a lot more cheaply now.”

The other side of it though is the rise of higher quality Australian tech entrepreneurs and companies. Atlassian is now a $US20 billion company. Online design software company Canva (which AirTree is invested in) is valued at over $US1 billion and considered one of the most promising tech startups in the world.

“I think we’re coming into our own,” Petre says.“I think we’re still punching under our weight in terms of our ability to build scaled technology companies, but we’re on the right trajectory.”

That this is happening without the kind of support the tech sector, in his eyes, deserves, is all the more remarkable.

Australia’s approach to skilled immigration, which startups say makes it harder to attract talent in critical roles from offshore, is “appalling,” he says. And the encryption legislation is a “disaster,”.

“My theory is, no-one will touch it prior to election because no-one wants to be seen to be soft on security,” says Petre.

On top of this, the recent crackdown on R&D grants is misguided, according to Petre.

“At a time when every country around the world is investing more government dollars and private dollars in R&D, the Australian government took $2.4 billion out of the R&D pile in the federal budget last year ,” he laments.

“I mean it’s just — it is nearly criminal to at a time when we need to be investing more in breakthrough technology and more in research, we are taking money out.